Can a lawyer charge a contingent fee in a case under a statute that lets the court award attorney fees to the winner, and must the fee deal be disclosed to the court?

Plain-English summary

The Commission addressed three questions about contingent fees in cases under fee-shifting statutes (statutes that let a court award attorney fees to the prevailing party): whether Bar Rule 8(c) prohibits a contingent fee; whether the existence of a contingent fee agreement must be disclosed to the court when a court-awarded fee is sought; and whether a contingent fee on the "gross recovery," defined to include the fee award plus the judgment, violates the Rules.

On the first question, the Commission read Rule 8(c)(3), which barred contingent fees where the method of determining attorney fees is "otherwise expressly provided by statute or administrative regulations," to preclude a contingent fee only where the statute indicates the court's fee determination was intended to be binding on all parties. Absent contrary legislative intent, fee-shifting language reflects only a judgment that the losing party should bear some or all of the prevailing party's fees, not a bar on the prevailing party paying a larger fee to its own counsel; in that situation Rule 8(c)(3) regulates only the claimant-attorney contract. So counsel must examine each fee-shifting statute for preclusive language, and where none exists the parties may set their own contingent fee, with statutory fee recoveries (a right of the claimant) normally applied against the contracted fee. On the second question, the Commission concluded the agreement's existence must always be disclosed to the court setting the statutory award, because the court is entitled to know what the parties considered reasonable (and counsel may want to show the risk factor to support a multiplier). On the third question, Rule 3.3(a) bars an excessive fee, but the Commission would not call a fee that includes the fee award in the contingency base excessive per se, given the many factors affecting reasonableness and because reasonableness determinations are committed to the Fee Arbitration Commission. It cautioned that, because an agreement for an excessive fee can be grounds for discipline, a lawyer should be satisfied the fee is reasonable under Rule 3.3(a)(1)-(9), and should adapt the standard Rule 8(f) form to satisfy Rule 8(d).

Currency note

This opinion was issued in 1987, before Maine's replacement of the former Maine Bar Rules with the Maine Rules of Professional Conduct (effective August 1, 2009). Subsequent rule amendments or later opinions may have changed the analysis. Treat this page as historical context, not current guidance. Verify against current rules before relying on any specific rule, deadline, or requirement mentioned here.

Common questions

Q: Can a lawyer take a contingent fee in a fee-shifting case?

A: The opinion concluded yes, unless the statute makes the court's fee determination binding on all parties; only then does Rule 8(c)(3) preclude a contingent fee.

Q: Must the contingent fee agreement be disclosed to the court?

A: The opinion concluded that in all such cases the existence of the agreement must be disclosed to the court or authority setting the statutory fee, so the court knows what the parties considered reasonable.

Q: Is a fee charged on a base that includes the fee award itself improper?

A: The opinion concluded such a structure is not excessive per se, but the lawyer should be satisfied the resulting fee is reasonable under Rule 3.3(a)(1)-(9), since an excessive fee can be grounds for discipline.

Q: Who decides whether the fee is reasonable?

A: The opinion noted that determinations as to the reasonableness of a fee are committed by rule to the Fee Arbitration Commission, so the Ethics Commission would not adopt a per se rule.

Background and rules framework

The opinion interprets former Maine Bar Rule 8(c)(3) (contingent fees barred where fees are otherwise expressly provided by statute or regulation) and Rule 3.3(a) (no excessive fee), with references to the contingent fee form and requirements of Rules 8(d) and 8(f) and the Fee Arbitration Commission's jurisdiction (Rules 9, 3.3(c), 8(f)). These correspond to ABA Model Rule 1.5 (fees, including contingent fees and the factors in 1.5(a)).

Citations and references

Rules of Professional Conduct:

• Model Rule 1.5 (fees; contingent fees)
• Maine Bar Rule 8(c)(3); Rule 8(d); Rule 8(f); Rule 3.3(a); Rule 3.3(c); Rule 9

Statutes:

• 39 M.R.S.A. section 110(1) (Supp. 1986-87) (example of a statute absolutely limiting the fee)

See also

• ABA Formal Op. 94-389: Contingent Fees
• Maine Ethics Op. 160: Forms of Contingent Fees
• Maine Ethics Op. 157: Contingent Fee Post-Divorce

Source

• Landing page: https://mebaroverseers.org/attorney_services/opinion.html?id=91429

Original opinion text

Reproduced from the official source for research purposes. The linked source is authoritative.

Issued by the Professional Ethics Commission

Date Issued: November 4, 1987

Questions Presented

a) Does Bar Rule 8(c) prohibit the taking of a contingent fee in an action brought under a statute providing for the award of attorneys' fees to the prevailing party?

b) If a court-awarded fee is sought, is the attorney seeking the fee obligated to disclose to the Court the existence of the contingent fee agreement?

c) If Rule 8(c) does not prohibit the taking of a contingent fee in such cases, are the Bar Rules violated if the contingent fee agreement provides that the attorney will receive a percentage of the gross recovery and gross recovery is defined to include the attorneys' fees as well as the judgment?

Opinion

Rule 8(c)(3) prohibits the use of a contingent fee agreement in any matter wherein the "method of determination of attorneys' fees is otherwise expressly provided by statute or administrative regulations." It is the opinion of the Commission that this provision precludes the use of a contingent fee agreement in a case involving a statutory fee provision regarding the award of fees to a prevailing party only if the statutory provision contains language indicating that the Court's determination regarding the amount of the fees was intended to be binding upon all parties. The Commission believes that, absent an expression of legislative intent to the contrary, the statutory language regarding fee-shifting should be taken as expressing no more than a legislative judgment that the non-prevailing party should bear all or a portion of the prevailing party's legal fees, and not a prohibition upon payment by the prevailing party of a larger fee to his or her own counsel. In such cases, the language of Rule 8(c)(3) would be taken as regulating only the contractual relationship between the claimant and his attorney with respect to the allowance of fees.[1]

The consequence of the foregoing analysis is that the claimant's attorney will be obliged in every case in which relief is sought under a "fee-shifting" statute to determine whether it was intended to be preclusive as far as establishing the amount of the claimant's attorneys' fee. If such preclusive language is not present, the claimant and his attorney are free to establish their own contingent fee contract. Since receipt of a statutory fee award is a right of the claimant rather than of his attorney, the claimant would normally be entitled to apply sums recovered for attorneys' fees from the non-prevailing party against the contingent fee contracted for.

With respect to question (b), the Commission is of the opinion that, in all cases, the existence of a contingent fee agreement must be disclosed to the Court or other authority determining the statutory award of fees. In making its determination regarding fees, the Court is entitled to be informed as to what the parties themselves considered to be reasonable. Moreover, as a practical matter, the plaintiff's attorney may want to demonstrate the risk factor involved to support a demand for a multiplier.

As to question (c), the Commission notes that Bar Rule 3.3(a) prohibits an agreement for or the collection of an excessive fee. The Commission cannot say that a fee agreement which included the fee itself in the base against which the contingency percentage is to be charged would be excessive per se. To do so would ignore the infinitely varying factors which affect the reasonableness of a fee. Of equal importance, determinations as to the reasonableness of a fee are by rule committed to the Fee Arbitration Commission. See Bar Rules 9, 3.3(c), 8(f). It would be singularly inappropriate for this Commission to adopt any per se rules as to the reasonableness of fees, for to do so would impinge upon the jurisdiction of a Commission of coordinate jurisdiction. However, because an agreement for an excessive fee can constitute grounds for discipline, we strongly recommend that in contracting for a contingent fee structured as set forth in the inquiry, a lawyer should be satisfied that, judged by the standards set forth in Bar Rule 3.3 (a)(1)-(9), any fee provided for in such an agreement would be reasonable.[2]

Footnotes

[1] For a statute which absolutely limits the fee which can be charged, see 39 M.R.S.A. §110(1) (Supp. 1986-87).

[2] We note that the contingent fee agreement form contained in Rule 8(f) may not meet the needs of the statutory fee-shifting case. Counsel should be careful to make appropriate adaptations to this or other standard forms so that compliance with the formal requirements of Rule 8(d) are satisfied and the terms are sufficiently clear to both lawyer and client.